Sadara Ventures — the name connotes “pioneering” in Arabic — was started by executives hailing from tech and finance, one from Israel and one from the Palestinian Authority. It recently closed a round of $28.7 million of funding.

And pioneering it well might be, launching as it is during the turmoil in the Middle East, with the pro-democracy movement sweeping the Arab world from Tunisia and Libya to Jordan, Saudi Arabia and Bahrain.

“If you wait for the perfect time to invest in a fund in the Middle East, you probably never will,” said Yadin Kaufmann, 51, one of the fund’s general partners. “There was a time when people thought” that investing in Israel was too risky, “and the people who thought that way missed out on an opportunity to make a lot of money.”

Initial investors in Sadara include Cisco
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Google
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via its Google Foundation, the European Investment Bank, economic-development funds run by investor George Soros and by former eBay Inc. President Jeff Skoll; AOL Inc.
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founder Steve Case and others, according to a Tuesday statement from Sadara Ventures. And the fund has the political backing of Palestinian Authority Prime Minister Salam Fayyad.

The fund’s managing general partners are Saed Nashef, 42, a founder of Equiom Inc., a software consultancy and project-outsourcing firm with operations in the U.S. and the West Bank, and a former Microsoft Corp.
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software engineer; and Kaufmann, 51, co-founder and a partner in the Israeli investment firm Veritas Venture Partners and chairman of Tmura, the Israeli Public Service Venture Fund. The fund has launched a search for a third managing partner. Read the 2007 MarketWatch article on Tmura.

“There is a significant untapped business opportunity in investing in technology-based companies originating in Palestine,” Kaufmann told MarketWatch. Entrepreneurs there “until now have had almost no access to risk capital or to international markets,” and the fund “will address both shortfalls.”

The PA does have the Palestine Securities Exchange. On Wednesday, the bourse’s benchmark Al-Quds Index edged up 0.06%.

“There are also social benefits in the minds of most of our investors,” he says, including “helping to create a knowledge-based economy in Palestine [and] high-value-added jobs; stemming the brain drain going on there, and generally contributing to development of a strong sustainable economy. That’s good for Palestine and everyone else in the region.”

In March 2008, Nashef and Kaufmann were introduced by a telecommunications executive. Kaufmann “had been looking to apply his experience in venture capital to pockets of entrepreneurship in the region,” particularly in the PA, Nashef says. He “had already started looking for potential partners. … He needed someone on the ground in Ramallah to partner with.”

In a Tuesday statement, the fund estimated that some 300 companies operate within the Palestinian Authority’s IT sector, employing some 3,200 people. The fund said it hopes to draw on “the substantial community of software engineers” as well as “a developed IT infrastructure” within the PA.

Sadara sees benefits in the Palestinian Authority as a gateway to a fast-growing broad Middle East-North Africa region and as a neighbor to Israel and its highly developed technology-based economy, the statement says.

The fund will be looking for investments in software development, mobile communications and Internet content and technologies. “We might look at health-care IT or a medical-device opportunity,” Kaufmann says. “It’s not an area we’ve seen a lot of in the West Bank.”

Criteria for investment

What stage of investment will the fund focus on? “As early as entrepreneurs want to approach us” as well as already operating companies, Kaufmann says. “The sweet spot of the fund will be very-early-stage companies.”

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